Director's report

The Board and CEO of AB Svenska Spel, corporate registration number 556460-1812, with its registered office in Visby, hereby submit the Annual Report and the Consolidated Financial Statements for the financial year 1 January–31 December 2013.

The company’s mandate and permits

The overriding goal of Sweden’s gaming policies is to achieve a sound and secure gaming market in which social considerations are heeded by meeting the demand for games under controlled forms. The aim is to counteract excessive gaming, which can lead individuals into gambling addiction, and to stop fraud and criminality in the gaming industry. Svenska Spel has a mandate from the State, after securing permits from the government, to organise games and lotteries in a responsible manner.

The company is tasked with:

meeting consumers’ demand for attractive gaming activities;
providing gaming forms that are deemed to entail risks of a social nature, within the framework for social responsibility, when this is believed to be able to curb illegal gaming in uncontrolled forms;
providing a credible but also attractive alternative to, first and foremost, uncontrolled gaming operations;
taking into account social considerations, fraud risks and consumer interests when gaming forms are being developed and in all other aspects of operations;
endeavouring to provide a well-developed service in both urban and rural areas;
focusing on social responsibility in its marketing so as to avoid being perceived as excessively intrusive.

The 2012 Annual General Meeting adopted a financial goal aimed at ensuring cost-effective operations. Over the course of an economic cycle of five to seven years, Svenska Spel should achieve an operating margin of at least 22%. The operating margin is calculated as the operating profit in relation to all revenue, meaning gross gaming revenue and other operating revenue.

The Swedish government grants a number of permits that form the basis of Svenska Spel’s operations. The applicable permits govern the following areas:

Lotteries and betting on sports competitions
VLTs
Casino games and the locations for casino games
Online Poker

Legal structure

AB Svenska Spel was founded in 1997 following a merger of AB Tipstjänst (established in 1934) and Svenska Penninglotteriet AB (formed in 1897), and is 100% owned by the Swedish State.

The Svenska Spel Group comprises the Parent Company AB Svenska Spel and subsidiaries Svenska Spel’s Förvaltnings AB and Casino Cosmopol AB. Svenska Spel’s Förvaltnings AB forms a sub-group with the subsidiaries Casino Cosmopols Fastighets AB, CC Casino Restaurang AB and Playscan AB.

Operational structure

In 2013, the Group was organised in three result areas: Sports Games & Lotteries, Vegas and Casino Cosmopol as well as six staff functions (Strategy, Parent Brand, IT, Finance & Security, HR and Communications & CSR). The legal staff function was integrated into Finance & Security on 1 November. A new position of Senior Advisor to the CEO was also created.

From 15 January 2014, a new organisation applies. Read more under Events after the balance-sheet date, hereinafter.

Sports Games & Lotteries result area

The result area is responsible for selling all games and lotteries through the sales channels: retailers, arenas, online, mobile phone, corporate customers and subscriptions. At 31 December 2013, Svenska Spel had 5,742 retailers (5,969).

Sports Games & Lotteries offers a broad gaming range in the form of sports games, number games and lotteries. The sports games are Stryktipset, Europatipset, Måltipset, Topptipset and Oddset. The number games are Lotto, Keno, Joker, Viking Lotto, Eurojackpot and the online games Bingo, poker and Pick´n´Click. Svenska Spel’s lotteries comprise Triss, Tia, Penning and Scratch games comprise Skrap-Pyramid, Skrap-Kryss, Skrap-Bingo and Skrap-Stjärna. The offering also includes a pre-packaged set of lottery tickets and temporary campaign lottery tickets.

The result area accounts for 69.5% (67.4) of Svenska Spel’s total net gaming revenue. In the 2013 financial year, net gaming revenue totalled SEK 6,766 million (6,615), up 2.3% year-on-year.

Vegas result area

The result area is responsible for the Vegas VLTs, which are the only gaming machines legally allowed in Sweden, except for the slot machines at Casino Cosmopol.

The VLTs are installed in selected restaurants with alcohol permits and bingo halls with bingo permits. A gaming location may not have more than five Vegas VLTs and the income from these may not dominate the operation. Under Svenska Spel’s permit, the total number of VLTs that Svenska Spel can install is restricted to 7,500 and at 31 December 2013, 6,713 (6,695) VLTs were installed at restaurants and bingo halls nationwide. These VLTs are distributed among 2,287 (2,276) business partners.

In 2013, net gaming revenue amounted to SEK 1,796 million (2,014), down 10.8% year-on-year.

Casino Cosmopol result area

Svenska Spel’s subsidiary Casino Cosmopol AB has been operating international casinos since 2001. The four casinos enjoy unique premises in Stockholm, Gothenburg, Malmö and Sundsvall, with a varied entertainment offering in terms of classic and new casino games, restaurants, bars and entertainment.

In 2013, net gaming revenue amounted to SEK 1,167 million (1,186), down 1.6% year-on-year.

Significant events in 2013

Eurojackpot, an international number game partnership with 14 European countries participating, was launched in January 2013.
In March 2013, Svenska Spel was certified for the second time in accordance with the World Lottery Association’s responsible gaming standard.
15 poker players were excluded and reported to the police on suspicions of utilising forbidden software. SEK 3.8 million was repaid to slightly more than 25,300 poker players.
As part of strengthening long-term responsible gaming efforts the company will fund a professorial chair in research into gambling addiction.
As part of combating manipulation of sports results and other gaming fraud, Svenska Spel has initiated a collaboration with the Swedish Sports Confederation, at which one of the confederation’s coordinators will work with training and coordination as well as creating channels and procedures for managing suspicions of cheating.
The responsible gaming tool for Vegas was introduced, which means that customers can set individual limits for their gaming.
Bonuses and discounts for games have been removed from the company’s customer offering.
A higher payout percentage was introduced for Oddset.
The first year of the Grass Roots sponsorship initiative was concluded, whereby customers influenced the allocation of SEK 50 million to their favourite associations. Funds were distributed to 6,365 associations around the country.

Events after the balance-sheet date

A new organisation applies from 15 January 2014 tasked with creating a clear, responsible, customer driven and efficient organisation. The Sports Games & Lotteries and Vegas result areas were reorganised into two new units: Market and the Customer Interaction Business Areas. The previous manager of Sports Games & Lotteries assumed the position as Manager of the new unit Market. The recruitment of a manager for the Customer Interaction Business Area is ongoing.

The staff functions Strategy and Parent Brand were eliminated. These staff functions were integrated into Market and Communication & CSR. Finance & Security has changed name to Business Support.

Marie Avander, Manager of the Vegas result area, Peter Jannerö, Chief Strategy Officer and Johan Lindvall, Parent Brand Manager were part of Group management until 14 January 2014.

Future outlook

The gaming market in Sweden is growing by about 3% per year and competition continues to increase, primarily from the unregulated gaming companies. Customers demand fast games with a high payout percentage, which often means games with a higher risk of developing gaming problems. Online casino games are increasing most and customers are increasingly choosing to play on their mobile phones rather than their computers.

For the total gaming market, online sales are expected to equal physical sales in three to five years. The government notified that, within the next few years, a more effective body of regulations will be implemented for the gaming market, which include an ambition to strengthen the Swedish Lotteries Act and check the increasingly aggressive marketing from unregulated gaming companies. Responsible gaming will continue to have the highest priority at Svenska Spel, which will impact the company’s revenue and earnings. The responsible gaming initiative that is currently being implemented is the most important initiative from the company for many years and will drive development toward a more long-term sustainable gaming market.

Financial statements